Bitcoin Terms Beginning with B
Backwardation is a market phenomenon which occurs when the spot price of an underlying asset is higher than prices trading in the futures market.
An upgrade to a system is backwards compatible if the upgrade does not render the old version of the system unusable.
A balance sheet is a document that details the assets, liabilities, and shareholders’ equity of an organization. Balance sheets are commonly referenced to assess the financial health of a company.
Base58 is an encoding scheme with an alphabet of 58 characters, including upper and lowercase letters A-Z and the digits 1-9. A variant of Base58 called Base58Check is used to represent legacy Bitcoin addresses.
Base64 is an encoding scheme used to encode Partially Signed Bitcoin Transactions (PSBTs). The Base64 alphabet uses 64 characters.
The Basis of Lightning Technology (BOLT) are specifications that describe the consensus rules and standards of the Lightning Network. The standards established by the BOLTs allow different Lightning implementations to cooperate.
Basis points, also known as bps or bips, are simply one hundredth of a percent. The terminology is normally used for percentage based values lower than 1%.
Batching involves consolidating multiple payments into a single transaction with many outputs. This can help senders save on fees, which are paid based on how much data their transaction uses.
A bear market is characterized by declines in asset prices, investor pessimism, and negative news. Officially, a bear market occurs when asset prices fall by at least 20% from their previous highs.
Bech32 is an encoding scheme used to encode SegWit addresses and lightning invoices. The Bech32 alphabet contains 32 characters.
Bech32m is a modified version of the Bech32 encoding scheme, which is used to encode SegWit addresses. Bech32m removes a vulnerability to insertion attacks present in the original Bech32 scheme.
A bid is an offer to buy an asset at a particular price. A given bid is defined by its limit price and its quantity.
A Bid-Ask Spread is the difference between the price to buy an asset and the price to sell that asset.
Binary is a number system that only uses two numbers: ones and zeros. Computers operate in binary, meaning they store data and perform calculations using only ones and zeros.
Bitcoin Improvement Proposal (BIP) 125 introduces Replace-by-Fee (RBF) to Bitcoin. This soft fork enables users to replace an unconfirmed transaction with a similar transaction with a larger fee.
Bitcoin Improvement Proposal (BIP) 16 introduced Pay-to-Script-Hash (P2SH) outputs. Activated in 2013, BIP 16 was a significant improvement for Bitcoin’s flexibility, enabling cheaper, more private multi-signature transactions, greater smart contract capability, and backwards compatibility for SegWit.
Bitcoin Improvement Proposal (BIP) 174 introduced Partially Signed Bitcoin Transactions (PSBT) as a community standard. PSBT is a standardized format for communicating unsigned or partially signed Bitcoin transactions.
BIP 32 is the Bitcoin Improvement Proposal which introduced the standard of Hierarchical Deterministic (HD) wallets and extended keys to Bitcoin.
Bitcoin Improvement Proposal (BIP) 340 introduces Schnorr signatures to Bitcoin Core. Schnorr signatures offer several significant advantages over ECDSA. BIP 340 is part of the Taproot upgrade.
Bitcoin Improvement Proposal (BIP) 341 defines Pay-to-Taproot (P2TR), a new way of sending bitcoin. P2TR combines the functionality of P2PK and P2SH scripts, giving users great flexibility and privacy benefits. Taproot outputs use Schnorr rather than ECDSA.
Bitcoin Improvement Proposal (BIP) 342 defines Tapscript, an update to Bitcoin’s scripting language. Tapscript enables Bitcoin nodes to create and validate Pay-to-Taproot (P2TR) outputs by upgrading the opcodes Bitcoin uses to evaluate scripts.
BIP 39 is the Bitcoin Improvement Proposal, which introduced the standard of mnemonic phrases. Mnemonic phrases offer a standardized method of backing up a wallet with 12-24 words.
Bitcoin Improvement Proposal (BIP) 44 defines the standard derivation path for wallets which generate Pay-to-Public-Key-Hash (P2PKH) addresses. This standard was implemented to ensure that HD wallets can import extended keys and find the bitcoin stored on that wallet.
Bitcoin Improvement Proposal (BIP) 49 defines the standard derivation path for wallets which generate wrapped SegWit addresses. This standard was implemented to ensure that HD wallets can import extended keys and find the bitcoin stored on that wallet.
Bitcoin Improvement Proposal (BIP) 8 proposed an alternative method to BIP 9 for activating soft forks. BIP 8 closely resembles BIP 9, with a few important changes, which are intended to improve upon BIP 9’s perceived downsides.
Bitcoin Improvement Proposal (BIP) 84 defines the standard derivation path for wallets which generate native SegWit addresses. This standard was implemented to ensure that HD wallets can import extended keys and find the bitcoin stored on that wallet.
Bitcoin improvement proposal (BIP) 9 established a standard framework for activating soft fork upgrades to the Bitcoin protocol. BIP 9 uses miner signalling to measure support for an upgrade.
A bit is short for “binary digit”, and is either a one or a zero. Bits are the atomic unit of digital data. All computer data is stored as bits, which are grouped into sets of eight, and called bytes.
Bitcoin is the world’s first decentralized digital currency that operates without a central authority and has a scarce supply. Bitcoin uses a peer-to-peer network, meaning no permission or middle man is required to send, store, or receive bitcoin.
Bitcoin Core is the reference implementation for the Bitcoin source code, meaning all other implementations look to Core for guidance. Bitcoin Core was started by Satoshi Nakamoto when they released the first version of Bitcoin's source code.
A Bitcoin implementation is a software program that is capable of setting up a Bitcoin node and interacting with the Bitcoin network. There are several different implementations of Bitcoin.
A Bitcoin Improvement Proposal (BIP) is a formal proposal to change Bitcoin. Upgrades, security improvements, industry standards, and more all begin as BIPs.
Bitcoin-Qt is the name of the graphical user interface or GUI which comes as part of the Bitcoin Core software package.
Bitcoind is the name of the software service that runs a Bitcoin node and wallet. This service comes with Bitcoin Core’s software and is used by most nodes on the network.
A block is a collection of transactions that occur on the Bitcoin network. Blocks are linked together chronologically to form a blockchain.
A block explorer is a software application that allows anyone to easily browse or query the blockchain.
A block header contains the metadata about a block of transactions. The block header, not the entire block, is what is actually being hashed to produce the Proof-of-Work.
Beginning at zero with the genesis block, all blocks are numbered in ascending order. This number is known as a block’s height. The current block height is simply the number of blocks in a given blockchain minus one.
The block reward is a combination of the block subsidy (newly minted bitcoin) and all transaction fees paid by transactions in a block. The block reward is collected by miners in the coinbase transaction.
The block size describes the amount of data which a block is allowed to take up, measured in bytes. Miners are not allowed to create a block with more data than the block size limit allows for.
The block subsidy is the amount of new bitcoin minted in each block, and it forms the largest part of the block reward. The block subsidy is cut in half every four years.
Block weight is a measure of the size of a block, measured in weight units. The Bitcoin protocol limits blocks to 4 million weight units, equivalent to a maximum of 4 megabytes.
A blockchain is a chronological list of records, called blocks. Each of these blocks contains transactions. Once a block is added to the blockchain, it is infeasible to alter, giving Bitcoin its immutability.
Bloom filters were a proposed scheme which would have allowed light clients to request transactions of interest in a private manner.
A brokerage is a financial institution which allows its customers to buy assets directly.
A brute force attack is a method of attempting to crack a password or decrypt data simply by guessing every possible password or decryption key.
BTC is the ticker symbol for Bitcoin. A bitcoin (1 BTC) is divisible into 100 million (100,000,000) sats.
A bull market is characterized by a sustained increase in asset prices, investor optimism, and positive news related to the market. Bull markets generally occur during times of economic prosperity.
A byte is a string of eight zeros and ones, or bits. Bytes are usually represented in hexadecimal notation, not as binary. One thousands bytes form a kilobyte (kB), and one million bytes forms a megabyte (MB).
Byzantine Fault Tolerance (BFT) is a trait of decentralized, permissionless systems which are capable of successfully identifying and rejecting dishonest or faulty information. Byzantine fault tolerant systems have successfully solved the Byzantine Generals Problem and are robust against sybil attacks.
The Byzantine Generals Problem describes the difficulty decentralized parties have in trustlessly establishing consensus.